Tuesday, August 9, 2011

Centre for limiting subsidised LPG to 4 cylinders a year

If you pay income tax or own a scooter, car or a house, you will soon be limited to four subsidised gas cylinders a year, if a proposal informally approved by an empowered Group of Ministers on Monday night is finally implemented.

Seeking to address a ballooning subsidy bill, the Manmohan Singh government has decided to bite the bullet and put into action this proposal to limit the supply of subsidised LPG cylinders.

The Empowered Group of Ministers (EGoM), headed by Finance Minister Pranab Mukherjee, has also decided to initiate a dialogue with the States for the direct transfer of the kerosene subsidy to beneficiaries in the form of cash with the intention of doing away with the current practice of supplying subsidised fuel under the public distribution system (PDS).

Senior officials told The Hindu that a formal decision on these two matters would be taken by the EGoM at its next sitting.

On a related note, the Parliamentary Standing Committee on Petroleum and Natural Gas last week suggested ending the sale of subsidised cooking gas to households with income of over Rs. 6 lakh per annum. A 14.2-kg LPG cylinder costs Rs. 395.35 in Delhi. This is Rs. 247 short of its market price. If the recommendations are accepted, households above that income threshold will have to pay Rs. 642.35 a cylinder. The panel also suggested that those holding constitutional posts, public representatives like MPs, MLAs and MLCs should also not get subsidised cooking fuel.

Under the EGoM proposal, the affected households will get only four LPG cylinders at a subsidised price. Officials said the calculations were based on a survey done by the oil marketing companies (OMCs), which states that each 14.2-kg bottle of LPG normally lasts a household 45-60 days and based on this calculation a maximum of six cylinders are considered enough to see a family through the year.

However, LPG distributor records indicate that a vast number of households are taking as many as 20 to 30 cylinders each year, a symptom of large-scale diversion of subsidised cooking gas for use in commercial establishments such as restaurants and dhabas and as auto fuel. LPG for commercial use is sold at the market price and packed in different cylinders.

The government has also accepted the major recommendation of the interim report of the Task Force on Direct Transfer of Subsidies on Kerosene, LPG and Fertilizer, headed by Nandan Nilekani.

“We have decided to initiate a dialogue with the State governments as nothing can be finalised on the kerosene programme unless we discuss the issue with them,” Petroleum and Natural Gas Minister Jaipal Reddy said.

The Task Force, in its interim report, had suggested ending the sale of subsidised kerosene. Kerosene is priced at Rs. 14.83 a litre in Delhi, which is Rs. 24.93 a litre less than its original price. The Task Force wants kerosene to be priced at Rs. 39.76 a litre and the poor or the targeted group given Rs 24.93 in cash for purchasing every litre of kerosene.

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